Study: IPO may decline to worst level in 10 years

Canadian IT entrepreneurs are becoming more reluctant to take their companies public according to a recent survey from PricewaterhouseCoopers Canada that reported Thursday that if initial public offering (IPO) activity continues to decline it will reach its lowest level in the past decade. Technology once the darling of IPOs saw its activity drop dramatically.

PricewaterhouseCoopers (PWC) said that its survey results indicated that IPO activity declined across all of the Canadian exchanges in the first two quarters of 2001. Compared to last year’s IPO survey for the six months from January 1 to June 30, the number of IPOs declined 27 per cent to 32 from 44. The total value was down 65 per cent to $1.5 billion.

Eric Slavens, PWC’s IPO services leader, said the 10-year low in the number of IPOs reinforces the volatility of the Canadian market for initial offerings.

Slavens said there are typically large swings year-to-year in activity, pointing out that in 1992 there were 64 IPOs, a year later there were 162, and that the number had fluctuated since from a low of 95 in 1995 to a high of 270 in 1997.

In cyclical and unpredictable markets it is important for companies hoping top raise funds with an IPO to be prepared to move quickly and get their offering to the market while it is still receptive, Slavens said.

The PWC survey measured IPO activity on all Canadian exchanges, and breaks down activity and value in six market sectors including financial services, life sciences, mining, oil and gas, products (including consumer and industrial) and technology and media (including media and entertainment). The value and average size of initial offerings in all these sectors fell in 2001.

The technology and media sector, which was the bright spot in terms of activity in the first half of last year, fell 71 per cent from 14 IPOs to four.

The total value of IPOs for the first two quarters of 2001 declined broadly and the technology and media sector saw a whopping 99 per cent decrease in the value of its IPOs. Meanwhile, the average size of IPOs also declined in all sectors and the technology and media sector did not emerge unscathed falling 97 per cent.

Meanwhile, another recent PricewaterhouseCoopers LLP survey in the United States reported that large IT vendors with venture capital arms that reaped generous returns on start-up investments over the last few years, have significantly curtailed investing during the first three months of 2001 [see story – Startups suffer from lack of IT vendor investment].

PricewaterhouseCoopers Canada, in Toronto, can be reached at